There Has Never Been a Better Time to Own These Stocks
Editor's note: They're two of the wealthiest people in the U.S. today...
Microsoft founder Bill Gates ranks No. 2 on Forbes magazine's most recent list of the 400 richest Americans – worth an estimated $106 billion. Just behind him at No. 3, legendary investor and Berkshire Hathaway founder Warren Buffett is valued at nearly $81 billion.
But Gates and Buffett aren't just hoarding all their money in the bank... Instead, according to Forbes, the two men have combined to donate nearly $75 billion in their lifetimes.
And as Stansberry Venture Technology senior analyst John Engel explains in today's Masters Series – which first appeared in the Digest on August 13 – these investments are helping to drive the latest innovations and breakthroughs in one potentially life-saving industry...
There Has Never Been a Better Time to Own These Stocks
Many of today's wealthiest Americans are following the same playbook...
They're giving away billions of dollars.
This isn't an entirely new idea. As far back as the late 19th century, Andrew Carnegie made "giving back" popular.
Carnegie led the expansion of the steel industry and became one of the richest Americans in history after he sold his steel business to J.P. Morgan for $480 million in 1901.
Then, in a renowned article written just a few years before he retired, Carnegie proposed an intriguing idea. It's the one I want to talk about today...
Carnegie's essay, titled Wealth, was not about generating a greater fortune – it was about responsibly giving it away.
A year after Carnegie retired, he founded the Carnegie Institute, dedicated to scientific research...
More than a century later, scientists around the world are still funding projects thanks to Carnegie's endowment, which represented the bulk of his fortune.
Today, it has grown to more than $3 billion... and plenty of other modern billionaires have followed Carnegie's lead, specifically donating to science...
For example, Bill Gates and his wife Melinda have funded an endowment worth more than $50 billion. They've even convinced billionaire investor Warren Buffett to join them in their effort. In July, Buffett said he would donate more than $3 billion in Berkshire Hathaway stock to the Bill and Melinda Gates Foundation... bringing his total donations to the foundation – among four others – to about $34 billion.
Like Carnegie, the Gates family is pumping huge sums of money into scientific research. They've formed a subsidiary to their foundation called the Bill and Melinda Gates Medical Research Institute.
The institute's focus is to eradicate malaria and tuberculosis – two of the biggest threats to public health around the world. And the Gates family is seeding vaccine companies and therapeutics startups.
It's also worth mentioning Sean Parker's nonprofit...
Sean Parker is widely known for co-founding Napster, the file- and music-sharing service of the late 1990s. Parker served as the first president of Facebook (FB) – during the company's developmental years – and later became an early investor and consultant to Spotify Technology (SPOT).
Parker is only 39 years old. But his success in Silicon Valley has made him a multibillionaire. In 2015, using $600 million from his own pocket, Parker established the Parker Institute for Cancer Immunotherapy.
The wealthiest Americans are divvying up piles of cash for medical research – and it's flowing into the publicly traded biotechnology sector.
As I'll show you today, there's never been a better time to own biotech stocks...
But before we break things down in the publicly traded sector, you have to understand how biotech companies arise.
Venture capital ("VC") firms typically seed startup biotech companies with their first rounds of funding. It's only after the technology matures that a company launches an initial public offering ("IPO").
That's when VC firms start to cash out.
In other words, before the public invests in medical breakthroughs, the firms that develop them are funded with private VC money. Sometimes, companies receive money from VC funds focused on health care. Other times, they get philanthropic venture funding...
You can use this information to gauge the health of the biotech industry...
VC funding in biotechnology is at all-time highs today. A record $17.5 billion in VC funding went to emerging therapeutics companies last year. Most of that money (70%) went to U.S.-based biotech firms.
VC funding in the U.S. more than doubled between 2016 and 2018, as you can see in the chart below. Arguably, U.S.-listed biotechnology firms are the best place to look for opportunity. They're outpacing every other country combined by a huge margin.
VC firms are seeding more early-stage startups than ever...
And we're also seeing a major rise in startup biotech companies going public. As you'll note in the chart, the number of U.S. biotech startup IPOs increased from 25 companies in 2017 to 49 last year.
More than half of the companies going public have either Phase II or Phase III experimental drugs in the pipeline.
The further a drug has moved through clinical testing, the more valuable it is. The risk of drugs failing in clinic, or being unsafe, slowly dissipates as they progress through clinical testing.
Most of this funding is flowing into one particular disease area...
Drug companies developing cancer treatments are getting the majority of startup biotechnology funding. In 2017, about 40% of all U.S.-based VC funding went to companies focused on cancer treatments.
That metric remained nearly unchanged at 36% for 2018.
Plus, these same trends are reflected in U.S.-based IPOs, where 40% of the startup biotech firms that went public in 2018 were developing cancer treatments. To us, that makes experimental cancer treatments a great place to make long-term investments in the biotechnology sector.
To sum this up, the best opportunities we see in the biotech sector right now are U.S.-based firms developing cancer treatments.
This shouldn't come as a surprise to anyone who reads my colleague Dave Lashmet's work in Stansberry Venture Technology...
I've worked with Dave for the past four years. I've helped him analyze clinical data and the science behind some of his recommendations.
Dave's monthly letter isn't for everybody. His recommendations are often highly speculative. Plus, it's one of the most expensive products we sell at Stansberry Research.
But that should tell you a little something about the value of Dave's work... When it comes to successfully identifying opportunities in clinical-stage biotechnology companies, Dave is remarkably successful.
Since he launched his newsletter in 2015, seven cancer firms in Dave's model portfolio have doubled their share price or more. These positions have made subscribers a ton of money.
A lot of Dave's success comes from his unique research strategy...
For example, in June, I met Dave at the American Society of Clinical Oncology ("ASCO") Meeting in Chicago. ASCO hosts one of the largest medical conferences devoted specifically to cancer research.
In the past, Dave has identified major investment opportunities from ASCO. In 2017, Dave and I found a small developmental cancer therapy firm with incredible data. Dave wrote it all up in his June 2017 issue of Stansberry Venture Technology...
ASCO has an annual meeting of 20,000 to 30,000 U.S. cancer doctors. For us, the ASCO meeting isn't just about the science of cancer treatments – it shapes the health care market because these same doctors prescribe drugs.
And the best thing we saw in this meeting is a new targeted cancer therapy from small cancer firm Loxo Oncology (LOXO)...
In the past 16 years that we've been following cancer treatments, we've never seen better drug results against solid tumors.
This isn't a cure for all cancer, only folks with that target. But for those individuals, it's profoundly effective – more than good enough to head straight for U.S. Food and Drug Administration (FDA) approval after Phase II trials.
Dave recommended Venture Technology subscribers buy shares of Loxo that month...
By January this year – roughly a year and a half later – Eli Lilly (LLY) acquired Loxo for $8 billion. The deal sent LOXO shares soaring, making Dave's subscribers a 183% gain.
That's the advantage of Dave's "boots on the ground" style of investing. I know from personal experience that Dave spends an absurd amount of time at medical conferences around the world. And his strategy often pays off.
Loxo is exactly the type of company that we're looking for. And acquisitions are an important metric to consider when you're analyzing the biotechnology industry as a whole.
Since 2009, there hasn't been a huge variation in the total number of acquisitions in emerging therapeutics firms. On average, there are around 40 acquisitions annually. What has changed, though, is the average value of each acquisition...
Most developmental biotech firms are acquired when they're in Phase II trials. That's when the first signs that a drug works are presented in the data. Phase I trials only give you an initial inkling of its safety profile.
Unsurprisingly, 10 of the 28 acquisitions last year were those developing experimental cancer treatments.
So what's all this telling us?
It's not easy to wade through heavy information like this. But when it comes to analyzing the market, good information can give you an edge.
Macro analysis is telling us that piles of cash continue to flow into the biotechnology sector. There's never been more VC funding going into startup biotechnology firms. Biotechnology IPOs are on the rise. And the total value of acquisitions has never been higher.
Across the board, there has never been a better time to own biotech stocks.
And when you dig a little deeper, you'll see that U.S.-based cancer firms are the best place to find value. They're your best chance to make huge gains on a potential Big Pharma buyout today.
Good investing,
John Engel
Editor's note: For years, nearly anyone talking about a "cure" for cancer was either misinformed... delusional... or trying to exploit folks desperate to save their loved ones.
Things have changed... After 244 years of research, science crossed a threshold in the past few months. Now, many of the world's top cancer doctors believe a cure is within reach.
And now is the time to invest in this trend... Since we're still in the early stages, you could make up to 1,000% returns in the coming years if you get in today. Dave Lashmet and his team recently put together a video to go over all the important details. Learn more here.